FORBEARANCE AGREEMENT
EXHIBIT
10.1
THIS
FORBEARANCE AGREEMENT is made and entered into as of this 25th day of September,
2008, by and between ENABLE HOLDINGS, INC., a Delaware corporation (“Enable”),
UBID, INC., a Delaware corporation (“uBid”), DIBU TRADING CORP., a Delaware
corporation (“DIBU”), Enable, and uBid and DIBU, each a Borrower are hereafter,
unless referenced individually, collectively referred to as (the “Borrower”) and
XXXXX FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), acting through its XXXXX
FARGO BUSINESS CREDIT OPERATING DIVISION.
R
E C I T
A L S
A. xXxx.xxx
Holdings, Inc., a Delaware corporation (“xXxx.xxx”), uBid, DIBU and Lender
entered into a Credit and Security Agreement dated as of May 9, 2006, as so
supplemented and amended (the “Credit Agreement”). Capitalized terms used in
this Forbearance Agreement have the meanings given to them in the Credit
Agreement unless otherwise specified.
B. On
August
4, 2008, xXxx.xxx filed with the Secretary of State of Delaware an amendment
to
its certificate of incorporation by which xXxx.xxx changed its name to Enable
Holdings, Inc. Enable Holdings, Inc. is a Delaware corporation. The name change
was recommended by unanimous consent of xXxx.xxx’s board of directors on July
14, 2008 and was approved by xXxx.xxx’s written action of stockholders owning
more than a majority of the outstanding shares of xXxx.xxx’s common stock. On
August 6, 2008, in connection with the name change, xXxx.xxx’s board of
directors approved the amending and restating of xXxx.xxx’s Bylaws to reflect
such name change.
C. Borrower
acknowledges that an Event of Default exists pursuant to the Credit Agreement
as
stated in the default letter dated July 25, 2008 and the recitations therein
are
true and correct in all manners and in every respect.
D. Borrower
acknowledges that demand is hereby properly made on the Borrower for all
Indebtedness due and owing by them to Lender.
E. Borrower
hereby acknowledges and agrees that all actions taken by the Lender prior to
this Forbearance Agreement were appropriate and proper.
F. Borrower
acknowledges that the outstanding principal Indebtedness
due
to
the Lender as of September 5, 2008 is $6,364,483.94.
G. Borrower
requests the forbearance by the Lender as specified herein and the execution
of
this Forbearance Agreement pursuant to the terms and provisions as hereinafter
set forth.
NOW,
THEREFORE, in consideration of the premises set forth above, the mutual promises
contained therein and for other good and valuable consideration the receipt
and
sufficiency of which is hereby acknowledged, the undersigned parties agree
as
follows:
1. The
foregoing Recitals are true and correct and all of said Recitals are
incorporated herein by reference as though fully set forth and made as terms
and
provisions of this Forbearance Agreement.
2. Except
as
explicitly amended by this Forbearance Agreement, all of the terms and
conditions of the Credit Agreement shall remain in full force and effect and
shall apply to any Advance thereunder.
3. The
Credit Agreement shall be and hereby is amended as follows:
a. Section
1.1 Definitions
shall be
amended to read as follows:
“Borrowing
Base” means at any time the lesser of:
(a) The
Maximum Line Amount; or
(b) Subject
to change from time to time in the Lender’s sole discretion, the sum
of:
(i) The
lesser of (A) the product of the Accounts Advance Rate times Eligible Accounts
or (B) $10,000,000.00, plus
(ii) The
lesser of (A) the product of the Inventory Advance Rate times Eligible Inventory
or (B) 85% of the Net Orderly Liquidation Value of Eligible Inventory or (C)
$7,500,000.00; provided,
however,
in the
event that the Obligations are not paid in full by October 6, 2008, then the
sub-limit on Eligible Inventory shall immediately be reduced from $7,500,000.00
to $5,000,000.00, plus
(iii) The
product of the Government Marketable Securities Advance Rate times Eligible
Government Marketable Securities, less
(iv) The
Borrowing Base Reserve, less
(v) The
Reserve, less
(vi) Indebtedness
that the Borrower owes to the Lender that has not yet been advanced on the
Revolving Note, and the dollar amount that the Lender in its reasonable
discretion them determines to be a reasonable determination of the Borrower’s
credit exposure with respect to any swap, derivative, foreign exchange, hedge,
deposit, treasury management or other similar transaction or arrangement offered
to Borrower by Lender that is not described in Article II of this Agreement
and
any other indebtedness owed by Borrower to Xxxxx Fargo Merchant Services,
LLC.
“Inventory
Advance Rate” means up to fifty percent (50%), or such lesser rate as the Lender
in its sole discretion may deem appropriate from time to time; provided,
however,
that
the Inventory Advance Rate shall be reduced by one-half of one percent (0.5%)
each week, beginning Friday, September 19, 2008 and continuing on Friday of
each
week thereafter.
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“Maximum
Line Amount” means $10,000,000.
“Reserve”
means a reserve in the amount of $250,000.00, which amount shall increase by
$25,000.00 per week, beginning Monday, September 29, 2008 and continuing on
Monday of each week thereafter.
4. All
references in the Loan Documents to xXxx.xxx shall be deleted and replaced
by
Enable Holdings, Inc.
5. Borrower
acknowledges and agrees that, in the event the Obligations are not paid in
full
by October 6, 2008, Lender shall immediately obtain an updated appraisal of
Borrower’s Inventory, by an appraiser and appraisal acceptable to Lender in its
sole discretion, with Borrower paying any and all costs for any such appraisal.
6. Borrower
agrees to pay to Lender a fully earning, non-refundable forbearance fee of
$50,000.00, which fee shall be due and payable upon the execution of this
Forbearance Agreement.
7. Borrower
agrees to pay to Lender a pre-payment fee in the amount of $125,000.00, which
fee shall be due and payable when the Obligations are paid in full.
8. Lender
agrees to forbear in taking any action against the Borrower until the earlier
of
an occurrence of an Event of Default after execution of this Forbearance
Agreement or October 6, 2008 (the “Termination Date”).
9. Borrower
acknowledges that it is presently in default, and that this Forbearance
Agreement shall not cure any default existing as of the date of this Forbearance
Agreement, nor shall any default be deemed cured, notwithstanding any action
pursuant to this Forbearance Agreement; but rather, defaults existing as of
the
date of this Forbearance Agreement shall be deemed to continue as existing
defaults. Lender shall charge the Default Rate as provided in the Credit
Agreement. Lender shall have the right to charge any termination fee as provided
for in the Credit Agreement. This Forbearance Agreement is intended not to
waive
or terminate any existing defaults, but rather to afford a moratorium in favor
of the Borrower and Guarantors by the Lender in executing upon such defaults
until the terms and conditions of this Forbearance Agreement are fully complied
with.
10. Borrower
represents and warrants that, in order to induce the Lender to refrain from
exercising its rights and remedies against the Borrower, as follows:
a. The
Lender has acted in good faith in its dealings with the Borrower;
b. The
Lender has made no agreement to extend this Forbearance Agreement beyond the
Termination Date and nothing herein shall be deemed to establish a “course of
conduct” requiring any extension of this Forbearance Agreement; and
c. Borrower
acknowledges and agrees that valid consideration exists for the Borrower to
execute this Forbearance Agreement.
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11. Default.
The
following or any one of them shall constitute an Event of Default (“Events of
Default”):
a. There
shall be a failure or perform any obligation, term or provision of this
Forbearance Agreement;
b. The
Borrower shall default in the performance of any obligation, term or provision
of the Credit Agreement;
c. The
Borrower shall default in the performance or observance of any agreement,
covenant, condition, provision, warranty, representation or term contained
in
this Forbearance Agreement or any document or instrument (as modified herein)
collateralizing, guaranteeing or collateralizing the guarantee of the same;
d. In
the
event any representation or warranty made by the Borrower herein or any
financial statement delivered to the Lender heretofore or hereunder shall prove
to have been false in any material respect at any time when made or
given;
e. In
the
event the Borrower makes a general assignment for the benefit of creditors
or an
assignment to an agent authorized to liquidate any substantial amounts of
property or becomes the subject of an "Order for Relief" within the meaning
of
the United States Bankruptcy Code or files an answer to a creditor's petition
(admitting the material allegations thereof) for liquidation, reorganization;
or
applies to the Court for the appointment of a receiver for any assets or has
a
receiver appointed for any material assets (with or without consent) or
otherwise becomes the subject of an insolvency proceeding;
f. In
the
event this Forbearance Agreement or any other document delivered to the Lender
shall, at any time after execution and delivery, and for any reason, cease
to be
in full force and effect or shall be declared null and void or be revoked or
terminated or the validity or enforceability thereof or hereof shall be
contested by the Borrower, or the Borrower shall deny further liability or
obligation thereunder or hereunder, as the case may be; or
g. In
the
event of the occurrence of any other default as defined in any of the documents
(as modified herein) identified in this Forbearance Agreement or an Event of
Default occurs in any document or agreement executed by the Borrower in favor
of
Lender or any other party;
then
and
in any such event the Lender may, at its option, and in its sole discretion
and
without notice, declare the Indebtedness of the Borrower to be, and such
Indebtedness shall thereupon become, immediately due and payable, together
with
accrued interest thereon and the Lender shall be entitled to all of its rights
and remedies set forth in this Forbearance Agreement and in any other document
delivered to the Lender by the Borrower or by law. Presentment, demand, protest
and notice of acceleration, non-payment and dishonor are hereby expressly
waived.
12. Release.
In
order to induce the Lender to refrain from exercising its rights and remedies
against the Borrower, the Borrower agrees as follows:
a. The
Borrower, acting on behalf of its, his, her or their respective successors,
assigns, heirs, and personal representatives, hereby give a full release from
all claims, sums of money, accounts, actions, suits, proceedings, and demands
whatsoever, which either of them or any of them at any time had or has up to
the
date of the execution of this Agreement, against the Lender, its officers,
directors, related corporations, branches, attorneys, employees, agents, and
successors for or by reason of or in respect to any act, cause, matter or thing;
and
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b. It
is the
express intention of the Borrower to provide the fullest possible release of
all
claims to the Lender. By its signatures below, the Borrower represents that
it
has read this release, had adequate opportunity to discuss it with its attorney
of its choice and fully understands its terms.
13. Miscellaneous.
a. The
Borrower shall be responsible for the payment of all reasonable attorneys'
fees
and disbursements incurred by the Lender in connection with the preparation,
execution, delivery, administration, and enforcement of this Forbearance
Agreement and all other agreements in connection with or relating to any loan
documents and agreements.
b. Nothing
herein shall in any way negate, modify, waive, alter, impair or release any
document or provision contained therein executed by the Borrower except to
the
extent the same are inconsistent with the provisions of this Forbearance
Agreement.
c. Representations,
warranties and any and all agreements made herein shall survive the execution
of
this Forbearance Agreement. All provisions in any and all documents executed
by
Borrower, unless specifically modified in this Forbearance Agreement, shall
survive the execution of this Forbearance Agreement.
d. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Wisconsin except to the extent superseded by federal law.
e. The
Borrower acknowledges that all documents referenced in this Forbearance
Agreement and executed in connection with this Forbearance Agreement are for
a
business purpose.
f. At
all
times now or hereafter, Borrower shall retain sole and exclusive control over
its business activities as well as its officers, employees and agents in all
matters. Borrower acknowledges that Lender has not controlled or is not in
control of Borrower in any manner. To the extent Borrower’s officers, employees
and agents assist Lender in maintaining or disposing of the collateral, such
actions will be deemed under Borrower’s sole and exclusive control, and rendered
as a necessary incident to Borrower meeting its obligations to Lender under
the
loan agreements and applicable law. Furthermore, Borrower shall remain solely
responsible for all obligations pertaining to its officers, employees and agents
(including, but not limited to, any payroll tax withholdings and taxes, worker's
compensation payment obligations and unemployment compensation payment
obligations) however arising. Borrower represents to Lender that Borrower has
paid all required payroll and withholding taxes through the date of this
Forbearance Agreement. Borrower shall inform its officers, employees and agents
that Lender is not to be considered an employer under any circumstances.
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g. Borrower
acknowledges that it has no defenses, offsets or counterclaims. In the event
Borrower files a petition under the Bankruptcy Code or an involuntary petition
is filed against Borrower, Borrower admits and agrees that Lender shall have
the
right (and Borrower shall interpose no objection thereto and hereby waives
its
rights with respect thereto) to request and receive from the Bankruptcy Court
or
any other court of competent jurisdiction, immediate relief from the automatic
stay imposed under §362 of the Bankruptcy Code or any stay or other restriction
on Lender’s rights hereunder, under any of the Court’s equitable powers, except
Borrower shall be afforded as an alternative to the foregoing, the right to
provide adequate protection to Lender, providing that said adequate protection
must be agreed and consented to by Lender, which agreement and consent shall
not
be unreasonably withheld a termination of the exclusive period under §1121 of
the Bankruptcy Code and a dismissal of the Bankruptcy case or proceeding.
Borrower has consulted with counsel and relied upon counsel’s advice in
connection with the negotiation and execution of this Forbearance Agreement.
Borrower further acknowledges and agrees that the representations,
acknowledgements, agreements and warranties in this Forbearance Agreement have
been made by Lender as a material inducement to Lender to enter into this
Forbearance Agreement, that Lender is relying on such representations and
warranties, has changed and will continue to change its position in reliance
thereon and that Lender would not have entered into this Forbearance Agreement
without such representations, acknowledgements, agreements and
warranties.
h. BORROWER
HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
SITUATED MILWAUKEE COUNTY, STATE OF WISCONSIN, AS DESIGNATED BY LENDER AND
WAIVE
ANY OBJECTION BASED ON FORUM
NON CONVENIENS,
WITH
REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS RELATING TO THIS
AGREEMENT, ANY DOCUMENT REFERENCED IN THIS AGREEMENT, ANY PROPERTY AND/OR
COLLATERAL REFERENCED IN THIS AGREEMENT OR ANY TRANSACTION ARISING THEREFROM,
OR
ENFORCEMENT AND/OR INTERPRETATION OF ANY OF THE FOREGOING.
i. BORROWER
HEREBY JOINTLY AND SEVERALLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO THIS FORBEARANCE AGREEMENT, ANY DOCUMENT
REFERENCED IN THIS FORBEARANCE AGREEMENT, ANY PROPERTY AND/OR COLLATERAL
REFERENCED IN THIS FORBEARANCE AGREEMENT OR ANY TRANSACTION ARISING THEREFROM,
OR ENFORCEMENT AND/OR INTERPRETATION OF ANY OF THE FOREGOING. BORROWER HEREBY
REPRESENTS THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY
GIVEN.
j. This
Forbearance Agreement may be executed in counterpart and by facsimile. Facsimile
signatures shall have the same effect as originals signatures.
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IN
WITNESS WHEREOF, the undersigned have executed this Forbearance Agreement as
of
the day and year first above written.
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By:
/s/ Xxxxxx X. Xxxxxxxx, Xx.
Its:
Chief Financial Officer
UBID,
INC.
By:
/s/ Xxxxxx X. Xxxxxxxx, Xx.
Its:
Chief Financial Officer
DIBU
TRADING CORP.
By:
/s/ Xxxxxx X. Xxxxxxxx, Xx.
Its:
Chief Financial Officer
XXXXX
FARGO BANK, NATIONAL ASSOCIATION
acting through its XXXXX FARGO
BUSINESS CREDIT OPERATING DIVISION
By:
/s/ Xxxxxxx X. Xxxxxxxx
Its:
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